Each time i sell armor and clothes to someone they wear the armor and clothes i sold to them.Huh? Is this a bug or something?

It is part of the original game.
Merchants will wear any clothing/armor that is better than what they previously have on.

The Morrowind Code Patch prevents this bug from happening.

Actually, I'm pretty sure if their unarmored is higher then their Light/Medium/Heavy skills, then they will never equip armor.

I HIGHLY reccomend the MCP though.

It's general NPC behaviour. NPCs always equip whichever item in their inventory gives them the highest armor rating (based on their skills). In addition they will also try to equip whatever clothes and jewlery have the highest value (perhaps reasoning that the most valuable item must have the best enchantment).

And this behaviour is really fundamental to all NPC. Even corpses behave in that way.

Even corpses behave in that way.

I thought it wasn't a bug, as it must be pretty normal putting the best armour on, but corpses do it? Never thought this was a bug lol.

Yep. The game's mechanics don't differentiate between alive NPCs and dead ones.